Question

4. What shapes would you expect from the following cost curves: total fixed cost, total cost, average fixed cost, average total cost?

Answer 1

Fixed cost as we all know is constant in the short run

so it will be a horizontal line

It is constant as the output increases

Variable cost increases as output increases

It is a linear upward sloping curve

Total cost is the sum of fixed cost and variable cost so it will also take the shape of upward sloping straight line

Average fixed cost curve is downward sloping

Average total cost is U shaped because firstly output decreases as the cost increase but after sometime output start increasing cost decreases

ATC TC Output